A chemical industry that once dominated India’s chemical sector is now thriving in Delhi.
The government’s demonetization drive has been credited with boosting the fortunes of some of India’s biggest companies, with some of the largest chemicals companies seeing their share prices surge in recent months.
Some of these firms have been hit particularly hard by the government’s move to curb the sale of their products in cash.
In recent weeks, the companies that have traditionally sold their products via the black market have been forced to take on the burden of selling the products in bulk, where there is no cash to pay the bills, and to buy the chemicals at a much lower price, in order to maintain profits.
The chemical sector has been hit hard by demonetizations as the market for their products is flooded with cheap cash, with many companies facing financial difficulties.
The Indian Chemicals and Chemical Engineering Society (ICCEES) and its affiliated bodies, the Indian Society of Chemical Engineers (ISCE) and ISCE-I, have been organising a national conference for the next six weeks in Hyderabad.
The conference will be attended by top executives from some of these companies and others from the industry.
The main objective of the conference is to encourage the industries to diversify and become more competitive in a fast-changing industry, said Shanti Vaidya, President of ISCE.
“A major reason for the industry’s current financial woes is that the government has not provided sufficient cash to purchase new production capacity and equipment,” Vaidyan said.
According to Vaidy, the industry has a lot of cash in its bank accounts but its share prices are not keeping up with the inflation and other economic challenges faced by the industry in the last couple of years.
The demand for new production facilities, however, has been a growing concern for the chemical industry.
The demand for these facilities is growing by around 10 percent a year and the industry is now importing around 40 percent of the chemicals that are needed for its operations, according to Vadika Srivastava, CEO of the Indian Chemists Association.
It has been estimated that India is importing more than 20 billion tonnes of chemicals annually and it is estimated that the country could consume 20 billion kg of chemicals in the next decade.
Companies like Sigma and its sister companies, BASF and Dow, are facing difficulties in keeping their suppliers compliant with the demonetised laws.
The companies are facing the biggest challenge as they are the biggest players in India’s chemicals sector, with BASF, Dow and other chemical suppliers making up about a third of the country’s chemical imports, according the ICSE.
While companies like Sigma have seen their share price rise by around 5 percent over the past year, the share price of the chemical manufacturers that have been affected by demonets are also expected to see a steep drop.
There have been calls from various quarters for a nationwide ban on chemical imports and the chemicals industry has also faced calls for a ban on certain imports.
Sigma has said that it will not sell its products in India and that it has to find a solution to ensure that its supply chains are not affected.
Sigma is one of the biggest suppliers of chemicals to the Indian market and the company has already been hit by the new restrictions.
The company said that, after being informed by the central government about the ban, it had begun preparing for a possible import ban of some chemicals that it supplies in bulk to various companies.
Sigmas main supplier, Tata, has also been in talks with the government over its supply chain and has been seeking a waiver from the government to continue to supply some of its chemicals to Tata plants.